Excellent: lots of brainstorming, people posting some good ideas. That was the goal of my starting this thread. My initial post wasn’t mean to imply that I have spotted all the cons and scams that Those in Power are running. I maybe spot a few, here and there.
So how do you suggest that we get in the game? Shorting treasury bonds seems too obvious – when the game is that obvious
US treasuries? Well, it IS clear we have a bubble that WILL eventually pop in a big grand way. What isn’t clear is when it will pop. Even legendary investors like Jim Rogers (co-founder of Quantum Fund) have so far been unable to get the timing right. Jim was interviewed as early as Aug or Sept (Bloomberg) explaining he was already shorting the bubble that had formed in US treasuries. However,in a later interview (12/16/2008) he admitted that his timing had sucked and he covered that short position in mid-Oct because he was losing lots of money!
However, I noticed in the last week in 2008, yields showed resistance to go lower and then yields starting moving up. I chose to go short then with ProShares PST and TBT. Eventually the 10-year yield popped up nearly ½ a point. The yield on the long bond exceeded 3% for first time since Dec 15th. Then I dumped “TBT” after making 6%, and PST making only 1.5% on that, deciding the effect was temporary and yields would continue to go lower. It was kinda stupid that I shorted the 7-10 year with ProShares PST, because obviously the play is in shorting the long bond. We know Bernanke stated his playbook in 2002 it was appropriate and sometimes necessary to pull down the long end of the yield curve when (deflationary spiral risk) economic conditions required extreme action. So I’m fairly confident deflation continues to deepen and the Fed will continue to buy down the long-bond yield, for some yet unknown months to come.
does that mean I should be front running Pimco and the govt by buying municipal bonds?
I don’t like the risk levels of that trade myself, but if you are to try it I would wait until the anticipated bankruptcy (of say CA) becomes front page news, and is more fully priced into those municipal bonds (but prior to a Federal bailout being priced in)
However, as other economies improve (Europe, Brazil, China) there will be an outflow out of US $$ into euros and other currencies – probably by the end of 2009.
Of course eventually the dollar will crash, either slowly or dramatically, and that will be one of the biggest money-making opportunities of the coming 10 or 20 years. It is very difficult to predict if we’ll see significant weakening (much more than the 10% correction seen in Dec 2008) of the dollar in 2009. I believe that stocks go much lower in 2009. The best-of-the-best, like Jim Rogers, explained that the 2nd half 2008 dollar rally was due to forced-liquidation out of various investments INTO the dollar, so I tend to believe that could continue.
However, I think that people like Karl Denniger and others have a compelling argument that 2009 will show additional worsening of economic conditions in 2nd/3rd world nations that will eventually have them significantly cut back on purchase of Treasuries (in a year the Fed must auction record Trillions of them), to divert more money to prop up their own economies. That is the Wild Card.
Let’s keep brainstorming on that in the months ahead. I absolutely agree with your suggestion of buying gold in 2009, but I plan to buy it earlier as in the first half, dollar cost averaging in whenever I see it under 800/ounce. Regards buying foreign stocks, I won’t do that until I see another very dramatic selling climax that takes Asian stocks much lower. For example, the Shanghai SSE Composite Index approaching 1,000 would get me interested. It is now around 1900, after having touched 1750 in 2008. Keep in mind it WAS over 6,000 just back in Oct 2007. I should note that I did buy Chinese stocks when the SSE touched 1800 and soon sold them at SSE at 2,000, considering that to be a false rally.
Seems most people believe that if they have some savings, they should be able to invest and make lots of money all with low risk.
Oil came down to $33/barrel at the end of Dec. Take that play as example. You see significant risk in going long oil when you can buy it at such a ridiculously low price? Oil ETF’s (double-long) climbed over 70% in a week as oil then climbed up to $50. I felt that risk was EVEN LOWER than say buying US treasuries into what is clearly a massive bubble in US bonds.
I say to you that buying oil long at $33/bbl is a low risk bet, because it is example of extreme market swing that you can buy on certainty of reverting to mean. You can be sure these bizarre times will bring additional such opportunities to make money at fairly low risk as long as you wait patiently.
I don’t see how you can predict what currencies are going to do.
I agree if you are talking about the difficulty of predicting dollar’s strength during the next year. However, if you’re unable to foresee the inevitable dollar trend over the long-haul (5-10 years and beyond) then you haven’t been paying attention; you haven’t added up the US government debt and compared it to GDP. Some OBJECTIVE estimates (CNN today) put US government debt now at 53 Trillion (includes US debt held by public + Unfunded obligations (SS, Medicare A, B, C) and Misc other debt)
